United Nations Development Programme

Farmers in India to benefit from Japanese organic cotton business partnership

28 Aug 2012

New York/Tokyo/ New Delhi — Nearly 30,000 low-income cotton farmers in India will gain improved health and increased incomes by switching to organic cotton production, following a commitment made by two Japanese companies to the Business Call to Action (BCtA) today.

BCtA is a global initiative that encourages companies to develop innovative business models that combine commercial success and sustainable development. It is supported by several international organizations, including the United Nations Development Programme (UNDP).

Japan-based general trading company ITOCHU Corporation and kurkku – a firm that promotes environmentally conscious lifestyle through sales of sustainably sourced food and apparel – have pledged to improve the income of Indian farmers, their health, and the environment, by scaling up production of organically produced cotton, which is free of synthetic pesticides and chemical fertilizers and has an approximately 30 percent higher market price.

The two companies pledged to scale up their Pre Organic Cotton (POC) Programme, which encourages farmers in India to switch from conventional to organic cotton production by guaranteeing to buy the cotton that is organically produced at a price higher than that of conventional cotton. Such a commitment is critical to the initiative’s success since it typically takes three years for farmers to obtain an organic certification; in the meantime, they are growing organic cotton, which costs more to produce, but are forced to sell it at cheaper, conventional cotton prices.

During the three-year waiting period, the participating farmers will see a 20 to 30 percent increase in their income, with a projected additional 12 percent increase once their farms gain official international organic certification.

“Companies such as ITOCHU and kurkku demonstrate the potential of innovative business partnerships to generate value for companies as well as communities,” said Susan Chaffin, Programme Manager of the Business Call to Action. “This new commitment to the BCtA, the first in recent years by a company from Japan, supports environmentally sustainable agriculture while at the same time increasing income for farmers in India.”

Cotton occupies a mere five percent of all farmland in India, yet it accounts for more than half of the country’s pesticide use, adding a financial burden to farmers and causing serious health concerns including skin and respiratory diseases.

The conversion process to organic cotton remains financially unfeasible for most farmers, despite the financial and health benefits. Certification takes three years during which time farmers experience a 20 to 30 percent decrease in crop yields. Moreover, they are unable to sell the organically produced crops at organic prices due to the lack of certification. In addition to lost revenue, the certification process entails additional fees which are prohibitive for many farmers, especially in developing countries.

Through its commitment to BCtA, ITOCHU — which has114 offices in 65 countries — will work with Indian companies to identify farmers who are interested in switching to organic cotton farming. ITOCHU will then supply farmers with the necessary training and certified organic cotton seeds. The company also provides a guarantee to purchase the pre-organic cotton at a higher price than what farmers would have received for uncertified cotton. ITOCHU further assists farmers by funding their certification fees and aiding them with administrative support during the conversion process.

“Through implementation of the POC Programme, ITOCHU is able to integrate ecologically sustainable business practices in the supply chain, thereby maintaining corporate social responsibility,” said Hitoshi Okamoto, Director and Managing Executive Officer at ITOCHU Corporation.

The BCtA commitment scales up the companies’ existing four-year partnership with Indian farmers, enabling an additional 6,000 families to transition to organic cotton production by 2015. The initiative will also rid 30,000 acres of land from harmful agricultural chemicals while improving the farmers’ health.

Since this initiative’s initial phase started in 2008, ITOCHU’s annual sales of pre-organic cotton have more than tripled. As a result of the programme, kurkku’s sales increased by 30 percent since 2007. ITOCHU and kurkku currently sell organic cotton to 60 Japanese apparel brands. This number is expected to grow to 250 brands by 2015, with 5,000 tonnes of pre-organic cotton produced by farmers waiting for certification.

“In the past four years, the POC Programme has demonstrated clear benefits for people in need, and we have been able to build trust between the different programme partners,” said Takeshi Kobayashi, President of kurkku. “I hope that our membership in the BCtA will encourage more people to support this important initiative, which helps to improve living standards for farmers in India.”

More information

Business Call to Action

BCtA is a global initiative that seeks to challenge companies to develop inclusive business models that offer the potential for development impact along with commercial success.

ITOCHU Corporation

Headquartered in Tokyo, ITOCHU Corporation began more than 150 years ago as a trading company, importing and exporting items around the world. It also owns or has significant investments in 324 companies. Ranked among the Fortune Global 500, ITOCHU Corporation has more than $52 billion in annual revenue.